Funding Litigation Does Not Violate Champerty Statute

On June 11, 2020, the First Department issued a decision in Matter of Wimbledon Fund, SPC (Class TT) v. Weston Capital Partners Master Fund II, Ltd., 2020 NY Slip Op. 03279, holding the funding litigation does not violate the champerty statute, explaining:

Weston next argues that this proceeding is champertous because (1) David Bergstein, Graybox LLC, and/or SIP are funding the first $500,000 of this litigation and (2) petitioner and Graybox or its designee agreed to divide the first $4.8 million recovered in this action. However, Graybox is not bringing this lawsuit; rather, petitioner is. Furthermore, the instant action does not fall under the narrow scope of champerty.

The origins of the champerty law are centuries old and the prohibitions against buying claims to sue on them largely have been removed. Still, we from time-to-time see champerty raised as a defense where the plaintiff is not the original beneficiary of a debt or claim. And now it is being used to attack litigation funding arrangements. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding the enforcability of a claim that has been purchased from the original owner.